Crunch talks on Ukraine begin in Geneva

Representatives from Russia, Ukraine the United States and the European Union gather for high-stakes diplomatic talks in Geneva on Thursday, seeking to ease the separatist crisis in the former Soviet republic.

Russian Foreign Minister Sergei Lavrov is meeting with his Ukrainian, US and EU counterparts just as pro-Kremlin separatists -- whom Kiev says are backed by Moscow -- consolidate their takeover of parts of Ukraine's southeastern industrial heartland.

The crisis talks come after a military operation ordered by Kiev to oust the separatists collapsed, with militants showing no sign of budging and even humiliating the government by seizing army vehicles originally dispatched to clear them out.

As tensions simmered, NATO announced that it is deploying more forces in eastern Europe, and called for Russia to stop "destabilising" Ukraine, which has been in deep turmoil since the ouster of pro-Kremlin president Viktor Yanukovich in February.

Russian President Vladimir Putin said in a televised call-in hours before the talks began on Thursday that he was certain Russia and Ukraine could reach a compromise following Moscow's annexation of Crimea, saying the neighbours shared common interests.

"I'm sure we will come to a mutual understanding with Ukraine. We will not be able to do without each other," Putin said.

A chance for diplomacy?

All eyes are now on whether diplomacy can save the day at the talks between Lavrov, Ukraine's Andriy Deshchytsya, US Secretary of State John Kerry and EU foreign policy chief Catherine Ashton.

"It has been difficult to get real dialogue going between Russia and Ukraine," a US State Department official, who wished to remain anonymous, told reporters late on Wednesday.

Washington and Kiev's priorities at the talks include trying to get Russia to demobilise the militias, despite the fact that Moscow denies any links to them.

The United States and European Union have already imposed sanctions on key Russian and Ukrainian political and business officials, including members of Putin's inner circle.

But if the meeting ends in failure, Western countries are prepared to slap Moscow with tougher, broader economic and financial sanctions meant to hurt its already struggling economy.

White House spokesman Jay Carney said Wednesday that the US was "actively preparing" new sanctions against Russia, with signs growing that Washington may be ready to target the country's key mining, energy and financial sectors.

But US officials privately signalled they had little hope that the Geneva talks would make significant progress.

"Each time Russia takes these kinds of steps that are designed to destabilise Ukraine and violate their sovereignty, there are going to be consequences," Obama told CBS News.

Minutes after landing in Geneva on Wednesday, Deshchytsya called on Russia to stop supporting "terrorist activities" in the east.

He also set out a string of other demands that will be difficult to meet, such as asking Moscow to confirm that Crimea -- which it annexed last month -- "is an integral part of Ukraine".

For its part, Russia's foreign ministry claimed Washington was backing Kiev's "war on its own people" in strident language that made any concession at the Geneva talks seem unlikely. And Putin has warned that the much-hyped "anti-terrorist operation" launched in the separatist east by Kiev's new, interim leaders has pushed the country dangerously close to civil war.

In the flashpoint eastern town of Slavyansk, insurgents who had occupied state buildings since Saturday were given a hero's welcome by locals Wednesday after they seized six armoured vehicles from government troops.

In another apparent humbling in the nearby town of Kramatorsk, Ukrainian troops -- some weeping -- handed over the firing mechanisms of their rifles to pro-Moscow protesters who had surrounded their column of 14 armoured personnel carriers. In return, they were promised they could leave in their vehicles.

"We will have more planes in the air, more ships on the water... and more readiness on the land," he said.

Authorities in Kiev also ratcheted up the verbal attacks on Russia, with Prime Minister Arseniy Yatsenyuk accusing Moscow of trying to build "a new Berlin Wall".

The situation in Ukraine's southeast is similar to what happened in the Crimean peninsula before it was annexed by Russia last month.

Ukrainian intelligence said Wednesday it had intercepted communications showing that the same Russian agents who oversaw the seizure of Crimea were now coordinating the unrest in the east.

And there are fears that a forceful military response by Kiev could prompt a devastating counterstrike by Russian troops who are waiting to act on Putin's vow to "protect" Russian-speakers in the neighbouring state.

Meanwhile the US, Britain and France called on Russia to stop interfering in Ukraine, in a stormy Security Council meeting dominated by a row over a UN human rights report.

British ambassador Mark Lyall Grant said the report by the Office of the High Commissioner for Human Rights showed that attacks against ethnic Russians in Ukraine were "neither widespread nor systematic".

Russia's UN envoy Vitaly Churkin dismissed the report as "biased" and not "reflecting fairly the state of the Russian-speaking population of the country."